Running a business is a bit like making your way through a forest with the help of a map. A journey where the stages and turning points are marked by budgets, strategic objectives or technological challenges.
The desire, or sometimes the need, to diversify and identify new markets would be akin to exploring new territories. To finish with the cartographic metaphor… just as you can choose to go ‘by guesswork’ or ‘by trial and error’, you can also prefer to use a good old 250,000 scale map or a state-of-the-art GPS.
Similarly, when it comes to managing the diversification of your business and seeking out new markets, you have a multitude of means and tools at your disposal to do more than just go with your finger on the pulse.
Let’s take a closer look.
Understanding technological diversification
Technological diversification can be defined as the process by which a company broadens its technological portfolio. It can do this by developing new technologies itself, or by adapting existing technologies to new uses. It can also be achieved by identifying the right partners (universities, SMEs or start-ups) to carry out this strategic move.
The common objectives of a technological diversification strategy are, for example, to increase competitiveness, reduce supply or geopolitical risks (sometimes linked), or seize new market opportunities.
It can also make a technology company more resilient to market changes, such as upstream mergers or the emergence of new forms of competition.
Technological diversification also has the potential to reduce manufacturing costs and quality defects.
Technological diversification, often the corollary of market diversification
Most often combined with technological diversification or evolution, market diversification enables a company to exploit new growth opportunities and/or reduce its exposure and dependence on a single sector or a small group of customers.
According to a McKinsey study, companies that diversify their technology portfolio tend to post revenue growth that is 15% higher than that of companies that do not adopt this strategy.
However, technology diversification also presents challenges. Time and resources have to be invested in R&D, and there is no guarantee that these efforts will bear fruit. What’s more, managing a diversified technology portfolio can be complex and requires sophisticated technical, legal and commercial expertise.
Examples of technological diversification
Some of the most famous companies owe much of their success to the identification of key technologies.
Apple and financial services
Apple is known for its iconic products such as the iPhone, iPad and MacBook. However, Apple is also known for Apple Pay, a mobile payment system that allows users to pay for purchases using their iPhone or Apple Watch. This initiative has enabled Apple to penetrate the financial services market and offer a practical and secure payment solution that complements its other business models.
Amazon and home automation
The e-commerce giant is an excellent example of technological diversification. In addition to its core business of online sales, not to mention its digital services, Amazon has diversified its offerings by launching products such as the Echo connected speakers with the Alexa voice assistant. This diversification has enabled it to gain a foothold in the emerging market for virtual assistants and to develop complementary services such as home automation and music streaming.
Tesla stores energy
Tesla is best known for its top-of-the-range electric cars. However, the company has also diversified its activities by offering energy storage solutions through its Powerwall product. The Powerwall is a domestic battery that can store solar energy and use it later to recharge your Tesla vehicle, but that’s not all! This encourages the adoption of renewable energies and opens up new opportunities in the residential energy market.
Samsung in Healthcare
A world leader in consumer electronics, Samsung has also embraced technological diversification. In addition to its TVs, smartphones and home appliances, Samsung has invested in the health sector by launching products such as the Gear connected watches, which monitor physical activity and provide health data to users. This diversification enables Samsung to appeal to a wider audience and capitalise on the growing trends in health and wellbeing.
These examples illustrate how world-renowned companies have successfully diversified by investing in new technology markets, enabling them to remain competitive and continue to grow. Technological diversification offers companies the chance to explore new opportunities, broaden their product and service portfolio, respond to changing consumer needs and better resist their competitors.
But this is also the case for many SMEs and start-ups. For the latter, the initial problem usually boils down to identifying the problem (behind the market and its players) that the technology they are developing will be able to solve. It’s not uncommon to see technology offerings that are capable of addressing dozens of market segments. Choosing then becomes a real headache.
How do you go about identifying new markets?
Identifying new markets is a process that involves researching, analysing and evaluating a number of factors: the nature of the need to be met, the level of service offered by existing technological offerings, their drawbacks (including cost, where applicable), the emergence of new needs made possible by technological breakthroughs (the emergence of the smart phone, for example) and, more generally, the appetite of this market for a new offering, regulations, growth rates, competitive intensity, etc…
it will also be very useful not to overlook industrial property issues, which may be quite different from those in force in the company’s home market. In particular, it will be necessary to verify freedom to operate in the future market…
One of the main tools used in this process is technological analysis. This involves understanding existing and emerging technologies, their potential applications and their impact on industries and markets. Classic but still useful methodologies such as SWOT analysis (strengths, weaknesses, opportunities, threats) and PESTEL analysis (political, economic, socio-cultural, technological, environmental, legal) can also be used to synthesise all the quantitative and qualitative information gleaned and capitalised on during the strategic decision-making process.
Let’s take the automotive industry as an example. Many SMEs and SMBs were hard hit by the crisis in the sector in 2009. Highly dependent on a small number of customers in a sharply contracting market, those that managed to bounce back looked for highly diversified application markets in order to reduce their risk of exposure to downturns in their main market.
Others had managed to anticipate by diversifying into the medical sector, for example, by supplying structural parts to global integrators already established in this sector.
More often than not, these changes have resulted in technological developments or innovations. So it’s a global approach that involves much more than just the company’s sales force. That’s why it’s so important to get it right…
Tools for identifying new markets: IPMetrix and TKM
When it comes to identifying new markets and diversifying into new technologies, a tool like IPMetrix will surprise you. Developed by TKM, this software offers a whole range of functions that can help your company diversify and find new customers.
Technology landscape analysis
With IPMetrix, you can carry out a detailed analysis of an industry or technology landscape, identifying new technologies, emerging trends and potential competitors. This can help your company objectively identify and prioritise new opportunities for technological diversification. It can also identify new customers in a very intuitive way.
Competitive monitoring
By monitoring your competitors’ R&D strategy, IPMetrix can provide valuable information about the new technologies they are developing. You can then anticipate and adjust your diversification strategy accordingly.
Technology assessment
IPMetrix can also be used to assess the value, maturity and viability of new technologies. This is a valuable decision-making aid if you need to invest in the development of these technologies or if you are looking to acquire them.
Patent risk management
By carrying out a Freedom To Operate (FTO) analysis, IPMetrix will help you identify potential risks associated with infringement of existing patents. This can help a company avoid costly legal battles and diversify its technology more safely.
Industrial property strategy
IPMetrix will also help to deploy an effective patent (or trademark) strategy, identifying existing patents, technologies and relevant regions in which to extend protection. This approach will be the essential complement to a technological diversification approach and will enable the company to protect its strategic assets as effectively as possible.
The future challenges of technological diversification
In the future, technological diversification will continue to be a key factor in the success and growth of companies. In an era of rapid innovation and fierce competition, the ability to adapt and innovate using existing technologies to penetrate new markets remains a key strategic advantage.
As information technology and AI evolve, technology information management and the ability to identify weak signals in a sea of information will become increasingly important. Tools such as IPMetrix, developed by TKM, play a crucial role in this process by helping companies to exploit the information available to identify opportunities for technological diversification.
Technological diversification is more than just a business strategy. It is a necessity to survive and thrive in today’s business landscape. As we move into an increasingly technological future, companies will need to continue to adopt, adapt and innovate with diversified technologies to identify and capture new markets.
